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Government Affairs Albany Update
January 21, 2011

LEGISLATIVE UPDATE

Senate “Job Creation & Taxpayer Protection Act” – This week, the Senate passed a package of three bills intended to promote job creation and impose fiscal disciplin on the state. These included:

S.1891 (Alesi), which provides a job creation tax credit and tax relief for small businesses and manufacturers. Its main provisions are: a credit of up to $5000 for three years for new jobs created (credit is based on PIT withholdings of new hires), with an additional $3000 credit in year one if the person hired was on unemployment insurance); elimination of personal income tax liability for small business related income (i.e., businesses with 50 or fewer employees or a net income base of less than $ 2 million); and reduces the corporate franchise tax rate for small business and small manufacturers to 3.25% for 2011 and to zero for subsequent tax years.

S.1892 (Ranzenhofer), imposes a cap on the annual growth of the state budget of either 2 percent higher than the prior years, or 120% of the increase in the consumer price index. The constitutional amendment would give the Executive the authority to exceed the cap in the event of a fiscal emergency or other extraordinary circumstances, however, the Comptroller would be required to independently certify the financial crisis. In any given year, fifty percent of tax revenue that exceeded the cap would be placed in a reserve fund and fifty percent would be returned to taxpayers in the form of direct tax rebates.

S.1919 (Zendin), same as A.787 (Destito), would adopt a constitutional amendment to require two-thirds vote of the legislature for any bill that “increases, extends, imposes, or revives any tax, fee, assessment, surcharge or any other such levy or collection…”

A number of business groups, including The Business Council, supported the Senate’s actions. Business Council President Kenneth Adams said, "The Senate Republicans are on the mark to focus on controlling state spending and taxes to create jobs. A state spending cap is a necessary reform to bring fiscal sanity to New York."

Governor Cuomo is expected to include both a spending cap, and a job creation tax credit, in his Executive Budget proposal due out February 1.

Extension & Modification of “Rent Control” – The most significant bill on the legislative committee agenda for next week is an Assembly bill (A.2674/Lopez, Silver) that would extend New York City rent control through June 2016 (rent regulation is currently set to expire in June of this year), reduce the allowable increase in rents for rent-controlled apartments that go vacant from 20 percent to 10 percent, and makes other program changes. While The Business Council has not taken a position on extension of rent control in previous years, this will be a significant issue in 2011 because of its importance to the Assembly majority, and its possible “linkage” to other business-related legislative issues. This bill is on the Assembly Housing Committee agenda for next Tuesday.

“Price Gouging” Private Right of Action – The Business Council is opposing legislation (A.890/Pfeffer) that would allow for individuals to bring suit and collect damages for alleged violations of the state’s “price gouging” law. Under this bill, and individual could collect his or her “actual damages,” plus $1000 (or $5,000 if the violation is determined to be willful). The Business Council generally opposes legislation creating new private right of actions, especially in cases like this where the underlying law is enforceable by the state’s Attorney General, which has a fully staffed consumer protection bureau. This legislation fails to preclude individual enforcement suits in cases where the Attorney General is taking action, or has determined that enforcement is not appropriate.

BUDGET UPDATE

New York ended December with a cash balance of $3 billion, due primarily to a delay in a $2.4 billion STAR payment. If the STAR delay did not occur, the state’s General Fund cash flow position would have been $231 million below Financial Plan projections.

The state’s Fiscal 2011 revenue and spending assumptions were overly optimistic, and the General Fund deficit is likely to approach $1.5 billion by the end of the current fiscal year.

General Fund personal income tax collections through December 31 totaled $15.1 billion and grew 3.9 percent, or $572 million, from the same period last year. Withholding collections have grown 5.5 percent year-to-date but will need to grow 8 percent to meet year-end projections. Conversely, estimated payments have grown 8.9 percent through December 31, but will have to increase nearly 29 percent in the last three months.

General Fund business tax collections through December 31 of $3.4 billion were $117.9 million, or 3.3 percent, below collections for the same period in SFY 2009-10, which is $193.5 million below updated projections. Business tax collections need to grow 29.1 percent over the next three months to meet current year-end projections.

REGULATORY UPDATE

H-2B Non-Agricultural Seasonal Worker Final Rule Published - The federal US Department of Labor issued its final rulemaking earlier this week for the seasonal H-2B worker program. As of January 2012, it will require employers to pay H-2B workers whichever is higher – the federal, state or local minimum wage; a wage determined by a collective bargaining agreement; a Davis-Bacon Act or Service Contract Act wage; the arithmetic mean of wages paid to all employees in the occupation in question. In some sectors, this will raise H-2B wages by as much as 50 percent.

The initial rulemaking had been published for comment in 2008 and finalized in late 2009; legal challenges to portions of the rule resulted in a court findings in 2010 that the USDOL had not adhered to certain administrative procedures in the rulemaking process and thus, portions of the rule were disallowed. USDOL is accepting comments through March 21, 2011; comments are limited to specific aspects of the final rulemaking.

USDOL maintains that the change is needed to ensure “U.S. workers are not adversely affected by the employment of H-2B workers.” In fact, a report issued in December by ImmigrationWorks USA and the U.S. Chamber of Commerce found no evidence that U.S. workers are in any way disadvantaged by the H-2B program.